The Twilight of Capitalism by Natylie
Baldwin
www.dissidentvoice.org
April 24, 2006

Kentucky
farmer and writer Wendell Berry once made an astute observation about the
profound flaw underlying both communism and capitalism as systems of human
organization: both force humans to be subservient to a colossal
institution -- in the case of communism it is the state and in the case of
capitalism it is the “free market” -- a market run by anonymous and
unaccountable piles of money voraciously seeking to acquire still bigger
piles of money, otherwise known as corporations. (1)

Economic analyst
David Korten took this observation about the nature of capitalism a step
further. He described how capitalism is eerily comparable to the disease
of cancer in that the economic players in a “free market” economy that is
run capitalistically will forget that they are one unit of a larger
network of units that comprise a systemic whole, all of which are
ultimately dependent upon each other for survival. When this forgetfulness
occurs in a cell in the human body, and the body’s various lines of
defense against it are overridden, a tumor will develop as the cell seeks
endless growth by dividing itself incessantly, eventually destroying major
organs and killing the host through its selfish consumption of resources. (2)

Korten, however,
does not advocate for the replacement of one form of suffocating and
unsustainable control with another as is the case with traditional
Marxism. He instead shows that the problem is not with markets as a
vehicle for the exchange of goods and services to meet human needs but,
more specifically, with capitalism as the means of organizing those
markets.

The market was not
originally intended to be organized as the money-worshipping corporate
nightmare it has become. Adam Smith, widely credited as the godfather of
market economics, also wrote and lectured extensively on human ethics.
(3) His Theory of Moral Sentiments opens with the
recognition that humans have an inclination toward concern for their
neighbors as well as self-interest. (2)

The definition of
self-interest, under capitalism, a term that came into wide usage only in
the early 20th century (2), is limited to
material gain. The fact that human beings tend to have other interests for
themselves, including spiritual connection, psychological
self-actualization, and creativity is ignored outside of the ability to
profit monetarily off of such desires.

Contrary to popular
mythology, “the invisible hand” is only mentioned once in the 900-page
Wealth of Nations. The term “capitalism” does not appear at all.
Furthermore, Smith made it clear that his ideas about market economics and
their consequent benefit to society could only be realized if certain
prerequisites were met. (2)

These prerequisites
include favorability of small human-scale enterprises over large
monopolies, a responsibility of each economic player to avoid harming
others, and restraint of those who disregard such principles. As Korten
points out, many of the commonplace practices of modern businesses,
especially corporations, run counter to these principles. Proprietary
laws that prevent consumers from knowing what ingredients are in the
products they buy, externalization of costs, and mammoth commercial
entities that operate as absentee owners while crushing competition from
local enterprises with a stake in the living community are some examples
that immediately come to mind.

The economic
perversion that is the capitalist system is based upon two false premises
that undermine democracy as well as healthy and accountable markets: a)
the idea of eternal and continued growth; and b) the idea that if all
players boundlessly pursue their own selfish interests with more money as
the sole measure of progress, then the best possible outcome will be
achieved for all concerned (a deviant and out-of-context interpretation of
Smith’s “invisible hand”). In a world of finite resources, the first
premise is patently absurd and dangerous. The second premise, while
equally absurd and dangerous, is trickier to untangle for people raised on
the canons of capitalism.

Classical
economists, the intellectual vanguard of corporate oligarchy, revere the
free market as a mechanism that produces a magical equilibrium among all
buyers and sellers that result in fair prices and a balanced supply and
demand relationship. Unregulated capitalism in reality, however, fosters a
huge disparity in the bargaining power of various parties. This disparity
was seriously tilted in favor of corporations in 1886 when a court
reporter, with ties to the railroad companies, deliberately and
erroneously reported that the Supreme Court had granted corporations all
of the constitutional rights of natural persons (Santa Clara County v
Southern Pacific Railroad). Because no one questioned this reporting,
it was published in law books and served as a false precedent for future
decisions. (4) The result of this manipulation of the
legal system governing capitalism is that the federal government provides
and enforces a legal framework that allows corporations to increasingly
operate with virtually no boundaries for their adventures in capitalism.
Since the Great Depression, the government has used taxpayer-funded
bailouts, bankruptcy policies and other tools, demanded by corporations
under the guise of “personhood,” to rescue them from collapse.

The free market as
it actually exists is manipulated by and for the benefit of a relatively
small group of people who have amassed a disproportionate amount of power
over the years. (5) The ideology of capitalism dictates
that they will continue to do so until they self-destruct when they bump
up against the limits that nature, in her ancient and accumulative wisdom,
has imposed.

Nature’s Limits

One aspect of
nature’s limits includes resource depletion. The depletion of fossil fuels
perhaps provides the example with the most immediate implications for how
humans organize their economic lives. The “developed” nations have created
lifestyles that are dependent upon expansive amounts of cheap and
plentiful fossil fuels, namely oil and natural gas. (6,
7) For instance, the size of the average American home
has increased significantly since the 1950s and 1960s requiring more
natural gas to heat or cool it. Similarly, many American families have
traded in their economical sized cars for large trucks and SUVs over the
past ten years. But the elephant in the living room when it comes to the
possibility of having diminished access to inexpensive fossil fuels is the
globalized economy.

Most of the food on
our tables is not grown locally but is transported hundreds, even
thousands, of miles to our grocery stores. (7) Much of
our clothing and other accessories come from halfway around the world. It
takes an awful lot of fossil fuels to keep this system going. Nations like
China and India, the two most populous, now aspiring to our standard, will
obviously place even greater demands on fossil fuel supplies. Without
cheap and abundant energy to fuel it, the globalized “free trade” economy
simply becomes unworkable.

David Ricardo, the
19th century economist who touted comparative advantage, the
underpinning of free trade philosophy, also laid down some boundaries that
are conveniently ignored in modern capitalism such as trade balance
between nations, full employment, and a prohibition on the movement of
production facilities and capital between partners. Thus, Ricardo’s vision
of “free trade” did not involve trade deficits, the exporting of labor and
profits, or any nation using a trading partner to live beyond its means.
(2) However, Ricardo seemed to have a blind spot
regarding certain potential ramifications of free trade, including
over-extraction, exponentially increasing populations and the subsequent
increase in demand of exported goods between nations requiring vast
amounts of energy for transport.

Interestingly, many
economists have conceded that Ricardo’s seminal work on economics,
Principles of Political Economy and Taxation, is disorganized and pays
little attention to actual facts or logical consistency. (3)
Ricardo admittedly dealt in abstractions and demonstrates that something
which sounds good in theory may in reality prove to be an unsustainable
mess when natural capital limitations, among other things, are not
considered in the equation.

Berry points out
that, in order for a community to remain viable and sustainable, it needs
not only to protect its production capacities and not import items that it
can produce for itself, it must also export only what constitutes a
surplus after all local needs have been fulfilled. Though “protectionism”
has had a negative connotation attached to it by those who place profits
above communities, he believes this is the one guarantee of balanced and
equitable trade based upon human needs and the unique environmental
capacity of each bioregion. He uses an observation made by Albert
Schweitzer about the effects of colonialism on the native Africans to
illustrate the point:

“Whenever the timber
trade is good, permanent famine reigns in the Ogowe region because the
villagers abandon their farms to fell as many trees as possible [for
export]. These people could achieve true wealth if they could develop
their agriculture and trade to meet their own needs.” (1)

In addition to
economic justice and self-sufficiency, the Ogowe could also have preserved
their ecological balance. Excessive extraction of resources is one of the
hallmarks of unlimited capitalism, whether it takes the form of
traditional colonialism or modern-day corporate globalization. When a
group of people derive benefits from goods and services where the costs
are tolled outside of their own communities, they will soon become
accustomed to these deceptively cheap benefits and their demand will
increase, thus encouraging the waste of human and natural resources as
well as environmental degradation.

Productivity and
Waste

Capitalism incites
waste in a variety of ways, especially in the areas of increased
investment toward nonproductive activity and the proliferation of
nonessential goods.

The current system
long ago evolved into a stage of finance capitalism whereby capital
has become increasingly controlled by those who are not engaged in useful
activity but who take from the system by expanding bank lending, creating
bubbles in finance and real estate markets, and betting on volatility in
currency prices. The idea is to make money from money rather than through
productive activity. In the process, money is no longer connected to
actual concrete items of value. (2)

As Korten explains,
a bank virtually creates money out of nothing as the sum of money a
customer deposits into a bank is still available to that customer even
though that sum is also made available to whatever party the bank then
loans it to. The bank then collects interest on the loan and makes a
profit. The only thing that backs up this phantom money is the agreement
of people to exchange their labor or other real wealth for it.

The stock market
works in a similarly bogus fashion as the money for most shares bought
does not go into the actual company but to the previous owner of those
shares after the broker takes his/her commission for the
transaction. Owners of stock shares simply wait for circumstances
conducive to selling those shares to a higher bidder. (2)
This collective activity is known as speculation or, in less sophisticated
terms, gambling. Unlike the level of wagering that typically goes on in
Las Vegas or Atlantic City casinos, this club is not open to the majority
of people who cannot afford to play. Stock market gains only affect
approximately the top 10 percent of the population. (5)
More importantly, it produces nothing of actual use to society but serves
as a diversion of investment away from productive activity.

The expansion of an
unstable system such as finance capitalism has been facilitated by its
increasing partnership with government. The Cold War provided the impetus
for a solidified corporate-government relationship resulting in a
permanent war economy. With more focus and investment on military
projects, capital goods industries like machinery, tools, railroad and
civilian shipping equipment, in addition to other items that enable other
industries and, therefore, form the basis of productive economic
self-sufficiency were neglected. Foreign suppliers are now relied upon for
the fundamental components of our basic infrastructure while a large
portion of investment has been concentrated on instruments of destruction,
only a tiny percentage of which would be necessary to annihilate the
entire earth -- all with the hope, of course, that it will sit idle
somewhere without ever being used. Ironically, those who have studied the
economy of the former Soviet Union will recognize the actual systemic
similarities between these two enemies, despite the ideological rhetoric
of each. (5)

On the more visible
end of the waste spectrum, there is the glut of pointless items made
available and sold to the public everyday. Most of the massive amounts of
garbage created from these items stem from packaging, one aspect of
marketing. In fact, marketing -- the process by which capitalists
constantly seek to convince people of the need or desire for such vapid
products -- accounts for the majority of waste in terms of labor,
materials and money. (8)

Also contributing to
incredible waste is the practice of planned obsolescence and the trend
toward more disposable goods. In order to maintain an artificially large
and continual market for (formerly) durable goods, manufacturers
intentionally make products that will wear down much faster or,
conversely, they will contrive “improvements” so that a higher quantity of
the product will be sold more often. (8) Other products,
usually made from non-biodegradable materials like plastic, are designed
to simply be used a limited number of times and thrown away.

With these kinds of
practices rampant, it is clear that capitalism only recognizes the natural
world as an eternal source of materials and as a bottomless garbage
dumpster.

Economic
Reorganization

So how do we go
about reorganizing our economy to effectively meet our community needs
while responsibly maintaining the larger natural system that we must live
within? It is intriguing when a family farmer, an ecologist, and a former
economic development consultant can all approach this question from their
own distinct angles and come to strikingly similar conclusions on what the
broad outlines of such a reorganization would look like.

These outlines
consist of three basic ideas: re-localization, reducing human consumption
to a much more sustainable level in terms of the ecological resource-sink
cycle, and the use of alternative fuels.

Re-localization is
the process of turning toward the local for fulfillment of as many basic
needs as possible. The emphasis is on economics of a smaller scale that
would break people’s dependence upon ecologically unsound practices. Such
an emphasis would have the ancillary benefits of deepening a sense of
community and culture rooted in place, more efficient utilization of each
community member’s talent, and a feeling of usefulness and
participation.

Turning toward the
local to fulfill basic needs is, of course, not feasible if we don’t first
make an honest determination of what constitutes real human needs. A
lifestyle based upon endless consumption of frivolous products and
wasteful practices will be curtailed; it is simply a matter of how and
when. The better solution to this challenge is to tackle it sooner rather
than later with as much discussion with our neighbors and democratic input
as possible. Many individuals and communities across the country are
beginning to do exactly this.

One of the first
considerations in the process of re-localizing and deciding the
what-and-how of our needs involves energy. The amount and type of energy
available is probably the most significant factor in how societies
organize themselves as far as size and complexity are concerned. (9)
This is due to the critical role that energy plays in all aspects that
sustain life, from the simplest microorganism to the most complicated
human trappings.

The self-limiting
and cooperative behavior implicitly required for a scaled-down, localized
and sustainable economic reorganization is a tall order, particularly in a
country like the United States that has not only grown accustomed to the
most energy-intensive lifestyle in history but is characterized by an
ethos of rugged individualism and competition -- an ethos that has been
reinforced by and provided a breeding ground for capitalism. Ecologist
Richard Heinberg points out in his book, Powerdown, that
anthropological history indicates that the quality of competitiveness,
though not necessarily an anomaly in nature or humans, becomes a
destabilizing force in a community when it goes beyond certain boundaries.
(6) This is reminiscent of the pathological dynamics of
cancer cells described earlier.

Cooperative
democratic behavior among both human and non-human creatures is crucial to
social and ecological sustainability. (10) Such stable
communities tend to be self-limiting in regards to population and
consumption. Competition, on the other hand, tends to predominate in
ecologically disturbed environments or with the successful invasion of a
competitive culture, which then creates disincentives for self-limiting
behavior and ultimately yields less stable societies. (6)

The good news is
that humans have the ability to adjust their behavior constructively over
time, even after setbacks, as well as a highly developed language
capacity. These two faculties make it possible to communicate the need for
and implement such adjustments more quickly. (6) When
political and economic systems become ends unto themselves rather than
means to serve humanity and its interdependent life webs, it is time for a
change. How the future plays out in terms of the related problems of
global warming, fossil fuel depletion, poverty, and overpopulation will
depend upon the collective choices we make now.

Natylie Baldwinis a writer and activist living in the SF Bay Area. This is her
second article in a series on democracy, sustainability and economic
localization. She is currently working on the third installment focusing
on the economic localization movement in Northern California. She can be
reached at:baldwinsznn@aol.com.